Missing in Action at the Paris Air Show

June 17, 2003

By Stanley Holmes The only U.S. military airplane flying at the Paris Air Show this year was an historical one - the Boeing B-17 Flying Fortress. This legendary flying machine soared over thousands of public spectators at Le Bourget airfield. Europeans, Asians, and others were visibly impressed by one of America's most enduring technological feats. The B-17 helped liberate Europe from the clutches of fascism and changed the course of history. Too bad the spectators - and, more important, leaders and buyers from many countries - couldn't see a more updated version of America's air prowess.

But such is the tense state of affairs between the governments of the U.S. and France these days. The chilling effect here at the June 15-22 Paris Air Show is as palpable as the roar of jet engines during the daily flying displays. In U.S. Defense Secretary Donald Rumsfeld's determination to punish France for opposing the Iraq War, no F-15, F-16, or F-18 fighter jets have left the ground at Le Bourget. All of these American-made jets flexed their technological might above Baghdad, and many friendly governments around the world have been keenly interested in seeing them strut their stuff aloft and receiving the latest information on their battle-tested performance from the top U.S. brass.

"SOME TENSION." Potential buyers will have to wait. As part of Rumsfeld's directive, no U.S. military official above the rank of colonel can attend the show. So, the American presence has dwindled. About 181 U.S. companies are exhibiting this year, compared to 350 at the 2001 Paris Air Show, which is held every other year. Some of America's biggest defense contractors, such as General Dynamics (GD), stayed home. Others, such as Boeing (BA), Northrop Grumman (NOC), and Lockheed Martin (LMT), have cut the number of their people here by 30%, according to U.S. aerospace officials. "Certainly, there is some tension," concedes Northrop Chairman Ken Kresa.

Most American executives are blaming the sluggish economy and the lack of key senior U.S. military leaders for their reduced presence at this year's show. No one would publicly risk criticizing the Pentagon's mandate, but it has clearly put a sour note on one of the few events that attracts the world's aerospace elite for a week of briefings, dealmaking, and socializing. At the 2001 show, Lockheed Martin execs participated in 800 meetings, but only four were with French military representatives.

"You don't go to Paris to see the French, because the French don't buy from us," says Joel Johnson, a senior vice-president of the Aerospace Industries Assn. "You go because Paris is the world's largest networking event for aerospace and defense companies."

WHO GETS HURT? Indeed, the Pentagon's petulant behavior toward the French could end up hurting the American aerospace industry. The fact that it can't show off its aircraft in flight or have a senior U.S. general brief the general of an interested Eastern European or Asian country on the recent performance of American jets or battle systems in the Persian Gulf, leaves potential customers all to the French, British, and Russian defense companies.

That's hardly helpful to U.S. aerospace industry, one of the few sectors that runs a trade surplus, about $28 billion in 2002. "It seems to me not going to the Paris Air Show gives good reason to boycott Mcdonald's or Coke," says Johnson of the AIA. "You certainly hurt French restaurants, taxi drivers, and some hotels. But you aren't hurting the government or French industry."

Many executives of European and American defense companies with business in the U.S. publicly downplay the tensions. Some insist that their plans remain unaffected by the ongoing transatlantic differences. They say defense contracts are negotiated over the course of months or years, and can weather periodic political tempests.

"POLITICAL NOISE." Northrop's Kresa says that while the lack of senior U.S. military officials certainly put a damper on one of the key reasons for U.S. defense companies to attend the show, the other reasons, such as meeting with the European companies and suppliers, continued as usual. "We see no major change in any of the programs going on," Kresa says. "I don't think it's necessarily hurt."

Rainer Hertrich, co-CEO of Continental aerospace consortium European Aeronautic Defence & Space (EADS), which makes Airbus commercial airplanes and is one of Europe's largest defense contractors, says he sees no indication that any contracts or partnerships his company has with the U.S. Coast Guard, Northrop, or Boeing are in jeopardy. "There is a lot of political noise at the moment, but I do not see any change in behavior or attitude," Hertrich says. "There is absolutely no indication there is any long-term impact in our transatlantic relations."

But just to be safe, Hertrich and EADS's other CEO, Frenchman Phillipe Camus, hosted a small dinner for some U.S. and British journalists that emphasized centuries of good ties between the Old and New Worlds. The evening began at a spot near the Brasserie Le Vigny (where the French built the Statue of Liberty), and a French historian talked about the beauty of transatlantic ties in the old days. The location was rich in other symbolism. It was a comfortable chateau on the Right Bank that had survived several Franco-Prussian wars, the two World Wars, and had hosted several world leaders, including President George H.W. Bush.

The implicit message: Bush Senior understood the importance of having good international relations. Let's hope his son does, too. If anything, Hertrich and Camus went to great lengths to underscore that the history of European-U.S. relations may not always be smooth, but each side has too much at stake to see the ties unravel. And despite all of the political noise, as Hertrich likes to say, that's the clear lesson at Le Bourget in 2003. Holmes, who's at the Paris Show, normally covers the aerospace industry from BusinessWeek's Seattle bureau